The ten biggest Wall Street lies of 2009

Author Les Leopold sums it up nicely, including the fact that TARP is only the tip of iceberg regarding taxpayer money being poured into Wall Street coffers. Merry Christmas to the big Wall Street banks, who work hard to . . . someone please remind me how these big banks to make the world a better place--what do they do for the economy or for productivity? Please tell me something more convincing than free market fundamentalism.

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William K. Black: It’s time for real economic reform

We are a nation in severe crisis. According to William K. Black, a white-collar criminologist, President Obama doesn't deserve any more of our patience:

The Obama administration promoted Bush's architects of the financial disaster and demands that we hail them as heroes. President Bush was ridiculed for saying: "Brownie, you're doing a heck of a job." FEMA administrator Michael Brown stood by while Hurricane Katrina reduced a single large city to ruin. Geithner and Bernanke stood by while scores of large cities were devastated.
Black offer much more than criticism. He offers ten opportunities for digging us out of this mess. It will be difficult to attain any of these while the banks own Congress, but we need to dig deeply an somehow find the political will. Here are two of Black's points that stand out to me:
Can the Wrecking Crew. Fire the senior leaders of Bush's and Clinton's financial Wrecking Crews and stopping treating them as financial experts. President Obama should not reappoint Bernanke as Fed Chairman. He should dismiss Geithner and Summers and cease to take any advise from Rubin. Replace them with the Reconstruction Crew -- people with a track record of getting things right and being effective economists, regulators, and prosecutors . . . End "too big to fail." These banks are "systemically dangerous institutions" (SDIs). They should not be allowed to grow. They should be shrunk to the point that they no longer pose systemic risk, and they should be subject to vigorous regulation while shrinking. They are too big to manage and too big to regulate. They are ticking time bombs that will cause recurrent global crises as long as they are SDIs.
Here are some of Black's other suggestions. I agree with all of them whole-heartedly: - We need to provide the FBI with 1,000 more specialized white-collar crime investigators. - No more executive compensation looting. - Kill TARP and PPIP. ("Use the funds to help honest homeowners that would otherwise lose their homes because of predatory loan terms.") - Make the Federal Reserve System public. - Defeat any proposal to make the Fed the "Uberregulator." - Create a robust "Consumer Financial Product Agency. - End the waste of long-term unemployment (Instead, of paying them to do nothing, pay them to do public works) Consider, also, Black's Five Fatal Flaws of Finance.

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We’re another step closer to auditing the Federal Reserve

This has been a long time coming. The Federal Reserve has never been audited. Ever. The House has now moved us a step closer to shedding real light on all of the secret deals:

The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed's opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.

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Jeffrey Sachs: Democrats and Republicans both offer only snake oil for the economy

Jeffrey Sachs, the Director of The Earth Institute at Columbia University, has sharply criticized both the Democrat and Republican approaches to dealing with our failing economy. For instance, Sachs complains that President Obama is seeking to kick up consumer spending through “near-zero interest rates, massive Fed financing of mortgages and various consumption incentives, such as rebates for new home-buyers and cash for clunkers.” According to Sachs, though this will simply get us into a new bubble, as the US consumer is encouraged to over-borrow. This is a terrible strategy “with budget deficits of about 10 per cent of gross domestic product.” How about those Republicans? Their “solution” is equally terrible:

For every problem there is a single Republican answer: tax cuts. Simple arithmetic reveals the stunning shortsightedness of this proposition. The federal government collects about 17 per cent of GDP in tax revenues. That roughly equals the outlays on social security, Medicare, Medicaid, veterans’ benefits, defence and interest payments on debt.

All the rest – roads, rail, clean energy, science and technology, diplomacy, international disease control, space, education, job training, water, transport, courts, poverty relief, homeland security, conservation, climate adaptation – is financed on borrowed money. All of these critical areas are underfunded, which hinders productivity, national security and private investment.

What a good idea that is being largely ignored? Sachs likes the idea of jump-starting the green economy:

One where the jobs would come through a massive expansion of low-carbon energy. We were told about plug-in hybrids, intercity fast rail and new water and sewerage plants to replace the crumbling infrastructure. We were told about a new infrastructure bank to fashion complex multi-state projects that would employ huge numbers of workers while building a cutting-edge economy.

Continue ReadingJeffrey Sachs: Democrats and Republicans both offer only snake oil for the economy